Saving the mail: A Q&A with Sen. Tom Carper on his bipartisan plan for postal reform

"If we don't act, the Postal Service will continue to twist in the wind."

In an era of email, Instagram, Twitter and Facebook, the U.S. Postal Service is struggling.

Over the last ten years, First-Class mail volume has dropped by more than a third, and over the last seven years, the Postal Service has lost more than $45 billion.

The Postal Service has also cut its career workforce by more than 25 percent over the last five years, putting the total number of the postal employees at its lowest in decades. It has also eliminated more than 1,800 delivery routes, consolidated 143 postal service facilities and cut hours at nearly 8,000 post offices nationwide. Despite these drastic cutbacks, the Postal Service reports that it only has about 19 days of operating expenses in cash on hand.

Among other things, Sen. Carper’s current postal reform proposal, co-sponsored by Sen. Tom Coburn (R-OK) would give the Postal Service more flexibility to experiment with its business model. For example, the Carper-Coburn bill would allow post office branches more freedom to offer “non-postal” services, such as drivers’ license renewals, and end the current ban on sending wine, spirits and beer through the mail.

The proposed legislation would also reduce some major liabilities on the Postal Service’s balance sheet, such as a current statutory requirement to “pre-fund” the health care costs of postal service retirees.

While the post-election to-do list for Congress is long, Sen. Carper argues that postal reform should be at the top of Congress’s priorities for the lame-duck. This interview has been edited for length.

R3.0: Let’s start with the most obvious question: Why do we still need the Postal Service in the 21st century?

Carper: There are about seven or eight million jobs in the economy that depend directly or indirectly on a strong and viable Postal Service. If we want to create a nurturing environment for job creation and job preservation, the idea of pulling the plug on an entity that’s a big part of the jobs and job creation in this country would not be wise, in my judgment.

R3.0: How do you envision the Postal Service adapting to the 21st century economy?

“[W]e can provide a much brighter future for the Postal Service. As a result, we’ll get better service for those of us who rely on the Postal Service – and perhaps in ways that we never imagined.”

Carper: I think the Postal Service is already beginning to adapt.

This morning, the Postal Service delivered groceries in roughly 32 zip codes across San Francisco, California. It started doing this a couple months ago with Amazon, and it seems to be going pretty well.

Amazon and the Postal Service are also partnering on next-day delivery of packages and parcels. It looks a little bit like what the Postal Service already does with Fed Ex and UPS.

They take handoffs from Fed Ex and UPS and deliver the last mile, the last five miles, or the last 10 miles in less densely populated areas where there’s really not an economic rationale for UPS or Fed Ex to deliver to those places, but the Postal Service is going there anyway.

About a year ago, they set up about 200 zip codes where they take a handoff from Amazon and then deliver the next day to homes and businesses. It went well, and now they are delivering to over 5,000 zip codes. That’s not a majority of zip codes in the country – there are about 40,000 zip codes – but it’s significant penetration. And it seems to be going well for both Amazon and the Postal Service.

The challenge here is how to help the Postal Service not just be relevant in the digital age but to prosper. They have a 200-year-old distribution network that’s unique in the country – it goes to every mailbox five or six days a week, both business and residential. And the question is: How do we enable the Postal Service to monetize that distribution network?

R3.0: Some might ask why the Postal Service needs to go into package delivery when we already have major private package delivery services, such as FedEx and UPS. Why is it necessary to have a government entrant in the marketplace?

Carper: I mentioned earlier the partnership between FedEx, UPS and the Postal Service. [That partnership exists] because [FedEx and UPS] don’t want to go to every mailbox in Delaware or in North Dakota or Montana.

The idea that the private sector would rise up and take care of vast parts of the country that are less densely populated is really the triumph of hope over experience. It probably wouldn’t happen, so I think a good argument can be made that the Postal Service can continue to provide a needed service. The Constitution says we have to have mail service, and the Postal Service is charged with doing that.

We’ve seen a drop in First-Class mail by roughly a third over the last decade – so the Internet has taken that away. But the Internet has given back another opportunity, and that is the growth in packages and parcels, which is enormous. The Postal Service can participate in that growth in a modest way but in a meaningful way.

R3.0: How about the storefronts themselves? If your legislation were to pass, would the actual experience of going into a post office be different too?

Carper: Co-locating services in a post office makes a whole lot of sense.

[For example,] there’s a big postal facility outside Los Angeles where hundreds of people come every day to get their passports. And the Postal Service does this in a way that actually makes money and provides a service to a large population.

Some of the nation’s post offices are insurance companies, and some of the nation’s post offices are banks. The Postal Service doesn’t want to be an insurance company or be a bank, but it does want to be able to find ways to use its locations to be able to create new ways of making money.

Another good example is that Fed Ex and UPS deliver wine, beer and spirits. Other postal services across the world do the same thing. We don’t. In Australia, the Australian post has made significant revenues delivering wine, beer and spirits.

R3.0: It sounds expensive to get the Postal Service to where it needs to be. How much money does it need?

Carper: Our legislation anticipates providing about $30 billion over the next 10 years to recapitalize the Postal Service.

They have a fleet of about 190,000 vehicles, which are an average of 24 years old. They are not energy-efficient, and they are not right-sized for delivering packages and parcels. We’d like to replace that fleet and also put in technology that would enable better service.

In Minot, North Dakota, we visited a mail processing center there, and I remember seeing someone pick up a big box trying to get the bar code on the package to read. Since it’s moving to packages and parcels, the Postal Service needs to have the right equipment in hundreds of mail processing centers so it can be timely and efficient.

The Postal Service has already done a great job of “rightsizing” the enterprise, and they’ve done some smart things in terms of negotiating collective bargaining agreements to try to be more cost-effective.

In the last 12 years, the Postal Service has cut in half the number of its full-time workforce and in the last six years, they’ve cut in half the number of mail processing centers from over 600 to 320.

The Postal Service has about 31,000 post offices, and about a third of them have moved from six-day-a-week, eight-to-ten-hour-a-day services to being open six hours a day, and in some cases, two.

Folks can use the post offices, but they don’t have a postmaster making $50,000, $60,000 or $70,000 a year. They may have someone there on a two-hour or four-hour-a-day basis making $15 or $16 an hour who is not as expensive as a postmaster. You can also use technology to provide services at kiosks and things like that

R3.0: What other steps would your legislation take to save the Postal Service money?

Carper: The Postal Service pays more money into Medicare than any other employer in the country. It pays a huge amount into Medicare and does not get full value.

My wife turned 65 this June, and she got a letter the month before from DuPont, where she used to work. It said, “Martha, if you want to continue having health care insurance through us, you’re going to have to sign up for Medicare.”

It’s not just Martha but every retiree who reaches 65. Thousands of companies in the country expect their retirees to sign up for Medicare when they reach 65, but the Postal Service doesn’t have the ability to do that.

Our legislation would let the Postal Service replicate what other employers are already doing and be more like a business. That’s a big savings, and that pretty much wipes out the prepayment requirement in the 2007 law for retiree health care.

It doesn’t get rid of it entirely, but it significantly reduces the liability.

The Postal Service has also overpaid into the Federal Employee Retirement System (FERS) by $2.5 billion or more. Our legislation allows them to get a refund for that and also allows them to change the actuarial assumptions so that the Postal Service does not continue to overpay into FERS.

We also have language in the bill that says an arbitrator has to consider the financial condition of the Postal Service when there are collective bargaining negotiations. Under current law, this may be assumed, but we say it more clearly.

R3.0: What if these things don’t happen?

Carper: The Postal Service has already used up its $15 billion line of credit from the Treasury, and it’s not been able to meet the requirement to prepay $5 billion for retiree health care.

The Board of Governors and the Postmaster have announced that they will be compelled to close another 80 of 320 existing mail-processing centers to take costs out of the system and to potentially reduce the service standards in place right now.

There’s a provision in the 2007 law that says that if the Postal Service has an emergency – such as the worst recession since the Great Depression – it can ask for an “exigent rate increase” to increase rates for a period of time.

Over a year ago, [the Postal Service] asked for a rate increase of 4.3 percent, and the Postal Regulatory Commission approved the increase through the end of this calendar year. After that, the rates would drop to where they were before October 2013. The mailers want to go back to the rates they had.

The management of the Postal Service would also like to go from six-day-a-week to five-day-a-week delivery, and we have in our bill a provision that says you have to maintain six-day-a-week delivery so long as mail volume remains at or above 140 billion pieces a year.

If it drops below 140 billion pieces a year in any four consecutive quarters, then [management] has the prerogative to go to five-day-a-week delivery.

Some of the postal workers, especially letter carriers, want to be working six days a week, so they’re not crazy about that. We have a provision that guarantees six-day-a-week delivery until 2017, but even so there’s trepidation.

R3.0: What’s your response to their concerns?

Carper: In our 2012 bill, we had a two-year moratorium on going to five-day-a-week delivery. But that doesn’t really incentivize postal employees to work harder and to sell harder. And it doesn’t incentivize mailers to mail more in order to ensure the mail volume doesn’t drop below 140 billion.

So we thought, why don’t we align incentives in a way that encourages postal employees to work harder and to sell harder, and the mailers to mail more? Having said that, there are still some folks that aren’t crazy about this.

R3.0: When was the last time you used the mail yourself?

Carper: Yesterday. We checked our mail, and my wife handed me a postcard with a snow-capped mountain, blue skies and forests. I turned it over, and it was from my son Christopher, who was in Colorado the week before. He had sent a picture postcard – with a stamp. It was a real treat.

There are houses all over Delaware where people have framed hand-written notes from me.

People find it special to get something that’s hand-written – not just from me, but from a lot of people. Even from a 26-year-old son traveling in Colorado.

R3.0: Assuming your legislation passes, what are the future challenges the Postal Service will have to face?

Carper: The world in which we live changes ever more rapidly, and 15 years ago, the idea that the Internet would undermine the Postal Service to the extent that it has is not something we saw coming.

I’m not sure what the next challenge is going to be. I’m focused right now on how we meet the challenges today.

How do we enable the Postal Service to return not to profitability but to a break-even operation and provide reasonably good service in a way that does not require further outlays from the Treasury?

How do we enable it to take advantage of a unique distribution network and get full value from what it pays into Medicare? That’s plenty on our plate right now. I’m inclined to let the future beyond the next ten years take care of itself.

I do know that if we don’t act, the Postal Service will continue to twist in the wind. Businesses need predictability and certainty, and the Postal Service has had a lot of uncertainty. That needs to end.

I think we can provide a much brighter future for the Postal Service. As a result, we’ll get better service for those of us who rely on the Postal Service – and perhaps in ways that we never imagined.

Sen. Tom Carper represents the State of Delaware. He is also Chairman of the Senate Homeland Security and Governmental Affairs Committee.